Take Five #021: “What's the BEST tip you've learned about buying companies?”

Five takeaways we loved at Kumo this week

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Take Five #021: “What's the BEST tip you've learned about buying companies?”

1. “What's the BEST tip you've learned about buying companies?”

From one of the top posts this week in the Buy then Build Facebook Group (a group with 6k members!):

More comments in there, including a long thread about operating experience.

From “What's the BEST tip you've learned about buying companies?” by Chris Bogdan on the Buy then Build FB group.

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2. How to get on the same page with the seller about large hairy details

SMBAcquisitionAttorney @SMB_Attorney

This is a no-holds-barred, “I am going to rip an LOI apart, throw it on the table, and dissect it in front of you,” kind of thread. Read this thread 2X, and you’ll be smarter than 90% of your buy-side competition. Let's go...

Great thread from the ever-helpful @SMB_Attorney covering

• Why do you really need an LOI?

• Transaction Description

• Purchase Price

• Reps, Warranties, and Indemnification

• Conditions to Closing

• Exclusivity and No-Shop

• Non-binding Effect of the LOI

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3. How not to buy a bad deal

At the tail end of last week, we finalized our sale of Sentiment Investor (SI). It's in much better hands now with a team that can execute on the vision. SI was a tough one for us. We had a bad transition when we bought it, lost 100% of the customer base in that process and then rewrote it, and effectively shelved it. It was a delight working with the group that bought it from us and I have full confidence they're going to make much better use of it than we did. […]

Sometimes, all you can do is hope for some kind of ending. I'm so glad we found SI a new and great home. It was a bad buy with a lot of hard lessons learned. Frankly, I don't know how I'd learn some of this stuff without going through it myself. Supposedly people can learn from the mistakes of others by reading about them. I think that's a tall order for real world stuff.

His full post-mortem includes notes on:

• Red Flags In Diligence

• Hold Money Back - Do not wire it all upfront

• Customer Diligence

• Product

• Product-Market Fit

From “How Not To Buy A Bad Deal & Our 2nd Sale!” from XO Capital

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4. Once you’ve acquired a new company: get ready for it to get emotional

Great thread by Steve Ressler on the 1 month, 1 quarter (3 month), 1/2 year, and 1 year path towards integrating an existing team into the fold:

Steve Ressler @steveressler

Congrats! Your company has been acquired. Next up: Post-merger integration Very little has been written about this less sexy part of M&A but it's equally (if not more) important. As such, here's a quick thread for newly acquired CEOs (and employees) dealing with integration🧵

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5. The nitty gritty on what it takes to own and operate a car wash, from one honest owner:

MultifamilyMadness @MultifamilyMad

What I learned today about owning and operating a car wash 🚗🧽after I spent several hours on site with the honest owner. First off, this owner has done an awesome job running this place for the last 12 years so none of what I’m about to say is bad not mouthing him in any way.

tl;dr on the full thread:

MultifamilyMadness @MultifamilyMad

All and all, this place was a dang cash cow, truly making 30% cash on cash return day 1. But it was not a passive investment at all. We were looking for something more automated and when I got there, I learned it was not at all. We passed on buying this asset.

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